UPDATE: Energy Resources Australia 1Q Uranium Output Falls On Lower Grades

Energy Resources of Australia Ltd. (ERA.AU) said Tuesday first quarter uranium output from its Ranger mine in Australia's Northern Territory was down 27% on year to 888 metric tons.

The Rio Tinto Ltd. (RTP) subsidiary had previously flagged that production was set to fall as it processed lower grade ore, but the market still marked the miner down. At 0250 GMT, its shares were off 4.9% at A$18.72.

ERA said average ore grades processed during the quarter ended March 31 of 0.17% uranium were down 41% on the previous corresponding period.

Chief Executive Rob Atkinson said higher seasonal rainfall meant the higher grade ore at the bottom of the Ranger open pit was currently under water and that he expected grades and production to remain at similar levels in the second quarter.

However, production is expected to recover strongly in the second half of the year when Atkinson said grades are expected to rise to between 0.25% and 0.3%, allowing ERA to meet its guidance for 2010 production to be similar to that seen in recent years.

"(The quarter) was pretty much in line with the guidance we provided and it is very much a year of two halves," he said in an interview with Dow Jones Newswires.

"The first half will continue at these sorts of grades, the second half, we believe, will be a lot stronger in terms of production, grades and also sales."

ERA noted that uranium prices had dipped during the quarter, with the spot price falling US$2.75 per pound over the period to US$41.75 and the long-term pricing indicator falling US$2 to US$59.

The miner said the softer market conditions would have a partial influence on its average realised sales prices in the first half of 2010.

However, Atkinson said despite this there was no change to the company's guidance that it expects average realised sales prices for the full year to be broadly similar to those seen in 2010.

Material mined during the quarter fell 60% on year and Atkinson said this was due to one of its specialist drills being out of action, preventing necessary drilling to protect the walls of the open pit and therefore limiting blasting that could be undertaken.

-By Alex Wilson, Dow Jones Newswires: 613-9292-2094; [e-mail]